Compliance, Documentation, SMSF

Establishment test ignores execution location

SMSF establishment test trust deed executed Australian superannuation fund

Where a trust deed is executed is not considered as to whether an SMSF has satisfied the establishment test to be considered an Australian super fund.

A sector specialist has reminded practitioners and trustees the location where the execution of a trust deed takes place plays no part in satisfying the establishment test allowing an SMSF to be classified by the ATO as an Australian superannuation fund.

“It is not actually necessary that the deed for the fund is signed and executed in Australia [in order to fulfil the establishment test] because the ATO places a big emphasis on the evidence that the SMSF was established with an initial contribution [made in Australia],” Accurium head of education told attendees of his latest technical webinar held last week.

He emphasised the critical factor in ensuring the establishment test is followed is to be able to prove the initial contribution made to set up the SMSF was paid and accepted in Australia.

“[The ATO’s attitude is] yes you’ve got a deed but an SMSF is a trust, a special purpose trust, you’ve got beneficiaries, the beneficiaries are members, and the trustees are holding assets on behalf of, or for, the beneficiaries [who are] the members. Well if there are no assets [established by the initial contribution] you don’t have that trust relationship,” he explained.

“So the [criteria to satisfy] the establishment test is that the initial contribution is paid and accepted in Australia,” he repeated.

Ellem took the opportunity to stipulate the establishment test operates slightly differently to the other conditions required to be present in an Australian superannuation fund.

“While [the establishment, the central management and control, and the active management tests] have to be satisfied at all times [for the SMSF to be considered an Australian superannuation fund], once we’ve satisfied the establishment test…it is effectively a once and for all requirement,” he noted.

“So once it is determined the fund was established in Australia it will forever satisfy [this test] at all the relevant times,” he confirmed.SMSF

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